From Evolution to Benefits – Key Features of GST Explained

The Goods and Services Tax (GST) was rolled out on July 1 last year in place of over fifty taxes collected by both central and state governments. The GST Certification Program aims to overhaul India's indirect tax regime by pooling together a variety of indirect taxes, including excise duty, service tax, value-added tax, Central sales tax, Octroi, etc, under one roof. You will then delve deeper into topics such as the historical development, key characteristics, and usefulness of GST in India.

1. The process of GST implementation in India

The concept of a unified GST structure was first introduced in 2000 by the Vajpayee government in India with the intention to reform and simplify the existing elaborate structure of indirect taxation. The Constitution (One Hundred Fifteen Amendment) Bill was tabled the same year to allow for the implementation of GST and to repeal other indirect taxes. However, since the stimulus package involved directions for putting into practice new, different political interests were at work for and against such formation on aspects like compensation to states, dual administration, etc. After several attempts and failures, the Constitution (One Hundred and First Amendment) Act 2016 opened the door for the implementation of a unified GST regime in India on July 1 2017.

2. Comprehensive Coverage

The reform that GST seeks to achieve is to extensively capture the taxability of goods, services and intangibles, while the previous was disjointed. Some salient inclusions under GST which were left out earlier: Some salient inclusions under GST which were left out earlier:

• The extension of taxation to services was done to a minimal extent, with only 119 services being eligible for taxation prior to the GST regime. While implementing the GST measures, all services, with the exception of those that fall under the negative list, are extended thus embracing a broader spectrum.
• Other features such as depreciation, advancing tax, Research and development tax etc, which did not exist in the previous regime, are some of the important features of GST.
• Some of the petroleum products, such as crude oil, petrol, diesel, and ATF were out of its coverage of excise duty earlier but are partially covered under the GST.
• Extra cess raised on sin and luxury items were not a component of the excise duty base as it went to State kitty. Under GST, all such cess now come under the tax base, which makes a basic difference to this tax system.

3. Elimination of Cascading Effect 

The unique aspect of GST effectively gives an input tax credit for the taxes paid at earlier stages in the supply chain, thus avoiding the issue of tax on taxes or what is referred to as the cascading tax effect. For instance:

• Input tax credit: Duty paid on raw material or inputs and service tax paid earlier on input services are now creditable against GST liability, eliminating the provision of tax on tax. 
• The earlier BCIP inter-state buyers who used to pay CST of 2% on purchases can now avail credit for such taxes.
• The tax burden will not be shifted to end consumers and the existing and proposed tax measures will provide a clear picture about the true tax burden.

4. Common Market Creation

GST seeks to encourage the country's inter-connectivity through the removal of fiscal barriers within the states.

Earlier, states in India were functioning like different markets as there was no uniformity in the rate of tax levied for different states as per the state laws and the entry taxes imposed over the movement of goods from one state to another. It has eradicated such hitches, created a free market for the whole country, and introduced GST.

Some of the common market benefits of GST include:

• The state government can impose no entry tax, octroi, etc, for inter-state trade of goods, which enables free movement across states.
• Forms, operating modes, tax rates and so on by country
• Greater convenience to undertake business operations at a national level.

5. Simplified Tax Administration

GST seeks to simplify the indirect tax administration in India through key initiatives like: GST seeks to simplify the indirect tax administration in India through key initiatives like:

• Single interface has saved multitudes of assessments and harassment compared to what was witnessed in the pre-GST era.
• Facilitating the option of online applications and procedures reduces time and effort spent on physical processes.
• Annual returns to be filed have been made more reasonable, which has increased the ease in this area.
• In the threshold exemption for small taxpayers and composition scheme for medium taxpayers, the legal carrying capacity of compliance burden is lowered for the smaller players.
• The central monitoring body for the apex taxation institution, the GST Council is responsible for monitoring national-level tax policy and rate changes, which can offer a unified and consensus-based approach.
• Self-assessment by the taxpayers and decisions by computers with little human input are advantageous to the taxpayers.

6. Benefits to Consumers 

GST regime in India empowers the end consumer by passing to them the multiple benefits of a unified tax system: GST regime in India empowers the end consumer by passing them the multiple benefits of a unified tax system:

• Reduction in the tax burden by the exclusion of tax on tax effect
• Exemption on larger Essential commodities that fall under the lower slab for GST, which causes the consumer to save
• Similarly, uniform prices across the country are achieved because of having a single tax rate per item and doing away with the state-level taxes.
• Better customer value as consumers are able to determine the specific taxes included.
• Savings resulting from tax and procedural reforms are also reflected in the operational costs of all businesses and indirectly on the consumers through better services, rebates or goods.

Conclusion

Finally, the implementation of GST is another tax reform that India started implementing after a long deliberation. For consumers, it seeks to improve compliance, for businesses, it seeks to produce long-term revenues, for both consumers and businesses, it seeks to establish common markets and improve the competitiveness of Indian trade and industry. While GST was launched with the stated goals of reducing the complexity of the structure of indirect taxes and eradicating inefficiencies in production and consumption decisions, it is now so within the bounds.